A "reverse merger" is a method by which
a private company goes public. In a reverse merger, a private company
merges with a public company with no assets or liabilities. The
publicly traded corporation is called a "public shell"
since all that exists is its corporate structure. By merging into
such an entity, a private company becomes public.

The Private company merges into a public company
and obtains the majority of its stock (usually 90% or more). The
private company normally will change the name of the public corporation
(often to its own name) and will appoint and elect its management
and board directors.

The advantages of public trading status, which are
outlined in greater detail below, include the possibility of commanding
a higher price for a later offering of the company's securities.
Going public through either a reverse merger or a registered spin-off
(described below) allows a private company to go public, typically
at a lesser cost and with less stock dilution than through an initial
public offering (IPO).

In an IPO, the process of going public and raising
capital is combined. In a reverse merger, these two functions are
unbundled - a company can go public without raising additional capital.
Through this unbundling operation, the process of going public is
simplified greatly.

The Private Company which has gone public obtains
the benefits of public trading of its securities, namely:

Increased liquidity of the ownership shares of the
company. Higher share price and thus higher company valuation. Greater
access to the capital markets through the possibility of future
stock offerings. The ability of the company to make acquisitions
of other companies using the company's stock. The ability to use
stock incentive plans to attract and retain key employees.

Going public can be a part of a retirement strategy
for business owners.

Simply by merging into a public company, a private
corporation can increase its value by three to five times. Considerable
tax advantages are available through the reverse mergers, and proper
exit strategies. The newly created value can become part of an estate
providing value not only for the founders, but for generations to
come.

The Benefits of going public through a reverse
merger, as apposed to an IPO:

The costs are significantly less than the costs
required for an IPO. The time is considerably less than that for
an IPO. Additional risk is involved in an IPO in that the IPO may
be withdrawn due to an unstable market condition, even after most
of the up-front-costs have been expended. IPO's generally require
greater attention from top management. An IPO requires a relatively
long and stable earnings history. There is less dilution of ownership
control. The company does not require an underwriter. You will receive
a higher valuation for your company.

Once a company is taken public through a reverse
merger, or a registered spin-off, the financial markets hold the
following future prospects in the capital markets for the newly
public corporation:

The market value of a public company is often substantially
higher than a private company with the same structure in the same
industry. Capital is easier to raise for public companies because
the stock has market value and can be traded. The public corporation
may be used for special purposes, such as qualifying as a category
two company for overseas offerings pursuant to Regulation S. The
trading price of the public company's securities serves as a benchmark
for the offer price of a subsequent public or private securities
offering. Acquisitions can be made with the stock since publicly
traded stock is viewed as currency for mergers and acquisitions.
Form S-8 stock can be issued for consultants.

It is essential that public companies, especially
newly public companies, actively maintain and manage a financial
communications program.

A newly formed public company would be well-advised
to invest in consulting services, to plan and execute a strategy
for building and maintaining an active interest in your company
within the financial community. Consultants are available to assist
the public corporation in providing corporate relations services
intended to increase awareness of your company on Wall Street. For
most people, re-capitalization and stock value appreciation would
seem reasons enough to be publicly owned, but there are other advantages
that a company can gain. A public company has a broader equity base,
thus increasing it's opportunities for obtaining financing for future
projects. Increasing the bottom line net worth of a company, as
well as its debt to equity ratio, enables it to borrow at lower
interest rates from traditional institutions.

Are you ready to go public? Please submit your
business plan, executive summary, to see if you qualify.